Tags: US | Mortgage | Giants | Future

Obama to Confront Future of Fannie, Freddie

Tuesday, 27 Jul 2010 10:14 AM

 

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The Obama administration, which has been under fire for not developing a concrete plan for mortgage giants Fannie Mae and Freddie Mac, says it will hold a conference in next month to discuss their future.

The administration said Tuesday the event will be held Aug. 17 at the Treasury Department.

The financial overhaul signed by President Barack Obama didn't address their future, despite protest from Republicans that it was incomplete without a plan for the two companies. The Obama administration has said it wants to wait until next year to determine their future.

So far stabilizing the pair of mortgage buyers has cost taxpayers $145 billion.

The government created the two companies as a hybrid of private company and federal agency to help make mortgages available. They buy home loans from lenders, package them into bonds with a guarantee against default and sell them to investors.

They own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion.

During the housing boom years, Fannie and Freddie faced political pressure to expand homeownership and competitive pressure from Wall Street to back ever-riskier loans. Defaults and foreclosures piled up. Two summers ago, the companies were in a desperate search to raise enough money to keep going. But it was too late, and the government had to take them over.

Speaking on "Meet the Press" on Sunday on NBC, Treasury Secretary Geithner said the administration's ultimate plan is likely to bring dramatic changes to the mortgage system.

"I think we're not going to preserve Fannie and Freddie in anything like the current form," Geithner said on "Meet the Press." "We're going to have to bring fundamental change to that market."

However, he suggested that the government will not fully exit the market. He said the administration will consider "preserving or putting in place a carefully designed guarantee" in which the government would ensure that it's possible for consumers to get mortgages — even in a severe recession.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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